Help: Federal Tax in ER

[Sam]

Husband and wife withdrawing 48K from their traditional IRA accounts under the 72(t) rule. Assume that this is their only income.

Income: 48K.
Standard deduction: 10K
Exemption for 2: 6.4K
Taxable income: 48 - 10 - 6.4 = 31.6K
From 2005 tax table. $4,014 tax

Did I miss anything? I will be doing something similar to this a few years from now, and would like to make sure there won't be any surprise. Thanks.

 

[Martha]

I get $3910 using the dinkytown calculator: http://www.dinkytown.net/java/Tax1040.html

This is using 2006 numbers, not 2005. The standard deduction for 2006 is 10,300 and your exemptions are 3300 each.

 

[Sam]

Thanks Martha.

So, if I withdraw 48K from my IRA I can count on having 44K after all taxes, right? I know I won't have to pay SS, medicare, but is there anything lurking that I need to be aware of?

 

[retire@40]

So, if I withdraw 48K from my IRA I can count on having 44K after all taxes, right? I know I won't have to pay SS, medicare, but is there anything lurking that I need to be aware of?

Don't forget any state income taxes.

 

[heyyou]

Your taxable account and emergency fund CDs will throw some taxable dividends. Newly retired here, so my emergency fund and my future Roth conversion taxes are the same CDs for now. 15% tax on 6% annual interest is not a lot of tax dollars, but do plan to spend the other 85% of the taxable interest, instead of choosing a slightly higher 72t withdrawal rate.

 

[Nords]

Did I miss anything? I will be doing something similar to this a few years from now, and would like to make sure there won't be any surprise. Thanks.

I don't know anything about AMT other than that I fear it. I don't think you can get bitten by AMT at this income level, but if you'd ever had to pay AMT before then I'd be terrified of the possibility of it happening again.

Any capital losses in excess of capital gains? Up to $3000 of the excess losses could be deducted. Any other deductions from mortgage interest? That could be greater than the standard deduction. Any losses from rental real estate? That Schedule E loss could also be deducted against income.

Another "nice" surprise would be tax credits. You've already covered the deductions but you might be able to take additional credits for childcare, energy-efficiency improvements, or other tax breaks.

 

[LOL!]

I see that the new TurboTax is out now. Since you are gonna use it anyways, why not get a copy now and run your scenarios?

 

[Sam]

Don't forget any state income taxes.

I will keep Texas residency. So I think I'm ok.

15% tax on 6% annual interest is not a lot of tax dollars, but do plan to spend the other 85% of the taxable interest, instead of choosing a slightly higher 72t withdrawal rate.

Mine will mostly be from the 72(t). The taxable portion will be small.

Any capital losses in excess of capital gains? Up to $3000 of the excess losses could be deducted.

This is uncalled for Indeed, there is but I will finally get them all deducted in 4 years.

Another "nice" surprise would be tax credits. You've already covered the deductions but you might be able to take additional credits for childcare, energy-efficiency improvements, or other tax breaks.

Can't think of anything that would apply to me. Child care? Not in a million years.

I see that the new TurboTax is out now. Since you are gonna use it anyways, why not get a copy now and run your scenarios?

I would like to do that. But I don't even know what are reported on the 1099R statement for IRA withdrawal.

 

[Nords]

Can't think of anything that would apply to me. Child care? Not in a million years.

Sorry, that was a vocabulary flashback from our childcare days. These days we get credits whether we use childcare or not.

Today it's called "child tax credit" on line 53 of IRS Form 1040 and it's good for $800 back on any dependent under 17 at the end of 2006, with of course a few exceptions.

http://www.irs.gov/pub/irs-pdf/i1040.pdf and search for <child tax credit>.

 

[retire@40]

...Today it's called "child tax credit" on line 53 of IRS Form 1040 and it's good for $800 back on any dependent under 17 at the end of 2006, with of course a few exceptions...

$800? I thought it is $1,000?

 

[Sam]

Today it's called "child tax credit" on line 53 of IRS Form 1040 and it's good for $800 back on any dependent under 17 at the end of 2006, with of course a few exceptions.

I never did qualify for that credit. No matter how I play with my numbers, I'm never in the range.